Since the start of the summer GBPEUR exchange rates have gradually fallen from the mid-teens to the lower teens and this is something that I have been forecasting. The closer we get to deadline day in regards to Brexit; I believe investors will sell off the pound, as they are concerned about a no deal. The recent gains against the euro we have seen for the pound following the worst rates in a year are discussed in today's EUR report, with the table below showing the range of exchange rates throughout the past 30 days which highlights the difference in return you could have achieved when selling £100,000.00 during the high and low trading points.
|Currency Pair||% Change||Difference on £200,000|
In recent weeks, GBPEUR actually dropped in the 1.09s, which caused a major concern for clients that are buying property abroad. However, in recent weeks we have seen an improvement and mid-market prices are now fluctuating in the 1.12s. The shift in sentiment comes from head EU negotiator Michel Barnier confirming that a deal could be reached with the EU in November, which no surprise is now being forecasted as the deadline. In addition, the EU have warmed up to the idea that technology could be used to secure a deal with the Irish Border.
Short term I believe the improvement in GBPEUR is an opportunity for euro buyers, as I expect the pound could lose value against the euro in the weeks to come as the closer we get to the November summit, I believe investors will get the jitters and sell off their sterling positions. Longer term (3-6 months) it looks like a deal will eventually be secured therefore I expect the pound to strengthen quite considerably when we start the process of leaving the EU.
Brexit, of course is a key topic for clients involved with euro exchange rates, however another topic that has made the headlines is the reduction of quantitative easing program that the European Central Bank have been running for the last few years. With the ECB cutting growth forecasts last week, an easy assumption would have been to second-guess that the President Mario Draghi could have gone back on his plan to cut the QE program towards the end of the year, however the President confirmed that QE would still be ending.
QE has had a fantastic impact over the last couple of years and has kick-started the European Economy.
Now that Draghi has said its not needed, if the European economy continues to tick over and perform at current levels, this can only be a good thing for the euro. Therefore even though I expect GBPEUR to increase overtime, this story towards the back end of the year could provide opportunity.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.
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